Bain Capital, the Venture Capital Firm that has become synonymous with Mitt Romney’s personal fortune, has been subpoenaed by NY Attorney General Eric Schneiderman for possible rampant tax evasion practices.
This blog has been critical over the years of the special tax treatment afforded to profits made from Capital Gains – profit made as an increase on investments - which is only taxed at rates of about 15%. Common wage labor is taxed at rates up to 38%. This creates a tax system that rewards stock and investment trading – which amasses wealth but creates no products or jobs - and punishes the actual creation of goods and services.
This is the legal tax code of course, but Bain is being investigating for making Management Fees charged to clients ‘appear’ to be investment income, rather than the fees they actually are.
Bain (and other firms) have a history of “waiving” the actual Management Fees they charge their clients; but in the place of these fees, they require the clients to place some of their investments in a fund for Bain, so that Bain receives the income from the investment; hence, the money Bain receives is taxed at 15% for capital gains rather than being taxed at 38% for the raw income from a fee.
I will remain a broken record on this issue, especially on Labor Day weekend: income from gambling with financial instruments must not be taxed less than the income earned by construction workers and firefighters and nurses and dressmakers who earn wages for providing the nation’s goods and services.
Whether Bain’s approach is legal or a tax-evading subterfuge will be settled in the court system.
Whether it is ethical and desirable as public policy, in light of how we tax honest labor, is much clearer.
Feeling Better
-
I went to work yesterday and completed a few tasks that needed to be done,
but by lunchtime, my migraine was back with a vengeance. I ended up going
home ...
11 hours ago
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